Editorial - Ballad Health is overcoming challenges

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Jun 4, 2019 at 3:00 PM

The plan to financially save the region’s two merged hospital systems appears to be working.

In a significant achievement that reinforces the necessity of merging the Wellmont and Mountain States health systems, Ballad Health has turned a decade of losses into gains. For the nine months ended Dec. 31, 2018, Ballad said operating cash flow improved to $158.7 million from $141.4 million in the prior year, a 12.2 percent improvement. For the past quarter, operating and total cash flow increased and revenue rose by 1.4 percent, while expenses decreased by 0.2 percent.

Merging major organizations with thousands of employees that operate on thin — or no — profits with highly complex balance sheets is extremely hard work. It involves taking stock of huge physical plants and other resources, identifying strengths and weaknesses, factoring in manpower allocation, and developing an operating plan that slowly but steadfastly turns failure into success. Often, there are unseen stumbling blocks.

“We know that in order to fulfill the vision of Ballad Health — to truly become a health improvement organization for our region — we must be strong stewards of our resources, especially given the headwinds all providers are facing,” Alan Levine, Ballad Health chairman, president and CEO, said in a news release. “We are pleased by the strong financial performance improvements over the past three quarters and will strive to continue to improve.”

This accomplishment didn’t come easy. Ballad said its bottom line improved due to “exceptional expense management” including a 31.3 percent reduction in the use of contract labor and improvements in productivity and focused supply cost management.

On the other hand, that opened capital to reinforce professional staff including a recently announced $10 million investment in increasing direct care nursing staff and nursing support salaries.

“Ballad Health’s investment into the region’s labor force continues to be powerful, with Ballad Health expected to spend more than $1 billion on the region’s labor force in the fiscal year,” the company said. “These improvements are in spite of challenges both reflective of what all providers are facing and also some that are unique to Ballad Health and the region.”

The road ahead will be rocky and not an easy one to navigate. Ballad identified continuing challenges as including declining volumes in certain services, a decline in total surgeries, and declining inpatient and hospital utilization rates, a phenomenon being experienced throughout rural America. The decline in admissions in Ballad Health’s service area is driven in part by efforts by Ballad Health and area physicians to utilize lower-cost alternatives to hospital stays as appropriate.

This reduction, combined with no population growth, reduces the overall volumes. As Levine puts it, Ballad faces “a rapidly changing landscape where our financial success is no longer judged solely by volume, but increasingly how we care for fewer people more efficiently, effectively and with better outcomes.”

But Ballad’s plan for improved financial performance is to be proactive with continued investment in new equipment, diagnostic technology, information technology and building improvements. Ballad Health expects to spend more than $172 million on capital improvements in the current fiscal year, which ends June 31.

Ballad still has a lot of work to do and a long way to go, but that it could this quickly report a financial turnaround is great news for the region and demonstrates a well-structured plan.